Its forecast and results raised hopes 2018 profits will hold up better than expected, despite obstacles such as rising raw materials costs, trade restrictions on products sold in Europe, and an aging customer base.
The Milwaukee, Wisconsin-based company now expects its motorcycles segment operating margin as a percent of revenue to be about 9% to 10% in 2018, compared with 9.5% to 10.5% it projected earlier.
That would translate into about US$25 million (RM101 million) in added operating costs, below Harley’s previous estimate of US$30 million (RM122 million) to US$45 million (RM183 million) from the European tariffs alone. This will likely result in upward revisions to the company’s 2018 earnings, said David Beckel, an analyst at Bernstein.
Harley’s second-quarter net income fell to US$248.3 million (RM1.008 billion), or US$1.45 (RM5.88) per share in the second quarter of 2018, from US$258.9 million (RM1.051 billion), or US$1.48 (RM6.01) per share, a year earlier. That exceeded analyst estimates of US$1.34 (RM5.44) per share, according to Thomson Reuters I/B/E/S.
The company retained its 2018 shipment forecast and said it would reveal plans on Monday about its strategy to train new riders, revive US sales, and grow its international business.
US President Donald Trump’s restrictive trade policies have inflated Harley’s raw material costs and put it in the crosshairs of a trade skirmish with the European Union. Last month, Harley unveiled a plan to shift production for European customers overseas to avoid EU’s retaliatory tariffs, a move that Trump slammed.
Trade tariffs have compounded the troubles of a company that has been grappling with an aging customer base, weak demand from younger buyers and discounts offered by its rivals.
In the second quarter, its US market share dropped 2 percentage points to 48.4% from a quarter ago as US retail sales fell 6.4% from a year ago.
Retail sales in overseas markets climbed 0.7% from a year ago. Sales in Europe were up 4% year-on-year and accounted for half of its international revenue.